Indian Overseas Bank, Central Bank of India Will Be Privatized? This Is What We Know So Far..

The government is unlikely to introduce a Bill in the ongoing Budget session to facilitate the privatisation of two public-sector banks (PSBs).

Endorsement And Ratification

The Niti Aayog put up the Indian Overseas Bank and Central Bank of India to be privatised

However, a key panel that would endorse the names is yet to make a final decision.

The Cabinet also has to ratify the draft Bill before it is introduced in Parliament.

The Banking Laws (Amendment) Bill, 2021, was supposed to be brought up in the winter session of Parliament that concluded on December 23.

But the government had to defer the plan due to fierce protests by bank unions.

Moving Ahead With Proposal?

Speculations that the govt may revive the proposal gained speed after the recently-concluded assembly polls in key states.

Following victory in four states in the elections, the government is widely expected to press ahead with its reform agenda.

VRS For Bank Employees

The All India Central Bank Employees’ Federation general-secretary BS Rambabu recently said  that staff of all PSBs would go on strike on March 28 and 29.

They want the government to withdraw the privatisation proposal.

However, the government may propose a voluntary retirement scheme (VRS) for employees of these two banks to the cabinet.

Minimum Government Stake

The draft Bill may recommend that the minimum government holding in PSBs be trimmed from 51% to 26%.

The government is likely to retain at least 26% of the lenders for the first few years.

The extent of the stake sale will depend on interest from investors and market conditions.

Foreign investment is limited to 20% in public sector banks but an increase in this threshold will make these banks more attractive to investors.

The government may also give up its entire stake in select banks to garner investors’ interests.

Reduced Target

In last year’s Budget, finance minister Nirmala Sitharaman had said that two PSBs and one general insurer would be privatised to rake in Rs 1.75 lakh crore in disinvestment receipts.

None of that has happened. 

As a result the government trimmed its disinvestment proceeds to just Rs 78,000 crore in the revised estimate for the current fiscal.

It appears that this target might also be missed since the LIC IPO will likely be postponed to the next fiscal due to the market turmoil in the aftermath of the Russia-Ukraine conflict.